Thread by @PM_DesaiD

The myth about unlimited loss
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In trading fraternity there is this common misconception that option selling has unlimited risk.

I am writing this thread to demystify the myth associated with option selling.

The lowest a stock can drop is zero so there is a floor for maximum loss in put option. However there is no limit to how high a stock can rise and theoretically selling call option has unlimited risk.

Yet with little knowledge and simple education this unlimited risk becomes completely manageable risk.

Sitting back and watching a stock continuously move against your position without doing anything about it is the most stupid thing one can do and only ignorance and stupidity can lead to this unlimited risk.

Few things an option seller can do to manage risk

Choose a liquid stock/index with lots of public interest

Take protection. Buying an option will completely eliminate unlimited risk

Sell a put with an intention of owning a stock

Sell a call if you already have stocks to sell

There are many more methods and feel free to add them in comments.

Educating oneself with risk management is the key to become a successful trader.

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Don’t be Chatur !! 😂😂